Sale of Stainless Steel Stockholder & Supplier
The Company
In the latter part of 2020, we received the mandate to sell Offshore Stainless Supplies Ltd, a Stainless-Steel Stockholder and Supplier based in Walsall, West Midlands. This well-established business came with a trading history of over 21 years. Originally formed in January 1999, Offshore Stainless Supplies had grown consistently as a producer and stockist of Stainless Steel Bar, Stainless Steel Sheet and Box Sections for a wide variety of sectors and applications.
Benefitting from solid customer relationships in a range of sectors, the company’s customer base encompassed Oil & Gas, Marine, Telecommunications, Transportation, Automotive, and Construction. Its portfolio of clients located across the UK with a growing overseas base reflected the Company’s well-established market presence and potential for expansion.
The business based its success on diversification within a wide range of targeted sectors outside of its initial sector of Oil and Gas. The company successfully targeted other areas through the introduction of the ferritic grade of stainless steels enabling the fabrication of sheet and box stainless steel products which facilitated rapid growth, generating annual sales of £5 million by 2005.
The business demonstrated consistent performance through investing in new machinery and developing a solid business structure to support sustainable growth. This investment in new machinery located in a leading-edge manufacturing facility has enabled the company to retain its above-industry average gross margin of 23% - 25%.
Having pursued its strategy of product diversification in recent years this has enabled the company to build significant scale with an average annual turnover in the last 3 years of c.£13 million. This revenue has been derived from an expanding client base with clients across the UK and internationally.
The Situation
Offshore Stainless Supplies was introduced to the market with the strong asset of a mature and highly skilled team of 47 employees facilitating the key operational areas of the business. Team operations were supported by a well-established and efficient organisational structure and led by a highly capable second tier management team. The business owner planned to exit into full retirement and was willing to fully support any reasonable handover period required by the acquirer.
Hornblower was introduced to this client by Richard Murray at Elephants Child business growth advisors. This entity had previously been engaged in an initial project of preparing the business for sale and following an initial valuation, we prepared to start the process.
The process of marketing Offshore Stainless Supplies generated high levels of interest from potential acquirers. The business first went on the market with Hornblower in September 2020 and by the time we had reached Heads of Terms at the start of March 2021, we had received 125 expressions of interest, and had had discussions with numerous qualified and funded buyers.
As with many deals, there were many detailed aspects to be agreed and negotiated through due diligence and the drawing up of the contract, which is an area we pride ourselves on in managing transactions to a successful conclusion.
The key challenge with this project was the significant value of the stock in relation to turnover which although it underpinned the company’s ability to supply large quantities of stock on short lead times, gave some acquirers some difficulty securing funding.
The Outcome
The company was eventually sold to Steel Dynamics Ltd based in Blackburn, a progressive business with significant synergy in the market. Led by Ian, Steel Dynamics had a plan to grow through acquisition and had funds in place to support this growth plan and most importantly, they understood the steel wholesale business model.
The result is a secure financial future for the vendor enabling his retirement after 23 years at the helm of Offshore and a valuable cash generating addition for the Steel Dynamics group.
The vendors were advised by Kate Hackett of The Wilkes Partnership (Legal). The buyers were advised by Chris Ross of Mills & Reeve (Legal) and Ian Johnson of Cowgills (Corporate Finance). The deal was managed by our International M&A Director, Mark Sykes. Mark manages business sales for Hornblower across the UK and internationally.
Further details regarding the sale of Offshore Stainless Supplies can be found in the deal announcement, reported in the Lancashire Telegraph. A press announcement was also reported in BusinessLive.
SOLD – June 2021
